Fed limits card fees

On Wednesday, the Federal Reserve Board proposed a rule that addresses remaining provisions of the new credit card law that take effect on Aug. 22, 2010. This last batch of changes under the Credit Card Accountability, Responsibility and Disclosure Act of 2009 includes gift card protections, restrictions on penalty fees and periodic reviews after interest rate increases.

The Federal Reserve called for significant limitations on fees, including a ban on charging a penalty fee that exceeds the dollar amount associated with the violation of the terms. For example, if someone is late making a minimum payment of $30, the late fee could not be more than $30.

According to the Fed's Web site, the amendment to Regulation Z also would:

Ban inactivity fees, such as fees based on the consumer's failure to use the account to make new purchases.

Prevent issuers from charging multiple penalty fees based on a single late payment or other violation of the account terms.

Require credit card issuers to inform consumers of the reasons for increases in rates.

Require issuers that have increased rates since January 1, 2009 to evaluate whether the reasons for the increase have changed and, if appropriate, to reduce the rate.

The 157-page rule will be open to public comments for 30 days from the date it posts to the Federal Register.

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